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Rule 68 Offers of Judgment

Proceed with Caution

October 17, 2017

If there is any occasion in civil litigation that calls for caution by counsel, it is the drafting of a Rule 68 offer of judgment, so warns the Fourth Circuit. Consistent with the general rule of contract construction, responsibility for clarity and precision in a Rule 68 offer is that of the offeror. That concept, along with a few twists and turns unique to a SCUTPA claim, was recently visited by our District Court in Bradley Johnson, as a general guardian, for and on behalf of S.J., a minor and individually on behalf of S.J. v. Hyatt Hotels Corporation, et al, 2017 WL 4473469 (October 6, 2017).

Johnson arose from an assault upon a minor and alleged, among other causes of action, a violation of SCUTPA. The case was resolved upon Plaintiff’s acceptance of an offer of judgment. Defendants’ offer of “$150,000 inclusive of any costs incurred” was silent as to attorneys’ fees. Following acceptance of the offer, Plaintiff filed a motion seeking fees in excess of $260,000, arguing there was no explicit mention of fees in the offer, thus they were not included, and he was the prevailing party by virtue of the Rule 68 offer of judgment. Defendants disagreed, asserting the offer of judgment provided for fees because it offered a total sum in resolution of all claims.

There is no Fourth Circuit opinion analyzing whether an ambiguous offer of judgment allows for attorneys’ fees under SCUTPA. In the conduct of its own analysis, the court acknowledged the primary goal of contract interpretation is to enforce the intent of the parties as evidenced by the language of the contract, and that it was unlikely the parties intended to leave open the issue of significant attorneys’ fees. Cognizant of the Fourth Circuit’s warning, however, the court found Defendants could have drafted the offer of judgment to include all costs and fees, but failed to do so. Moreover, because it is the responsibility of the offerer to be clear, the court construed the ambiguity against Defendants, finding the offer meant exactly what it said; it included costs but did not include fees recoverable under SCUTPA.

Finding Plaintiff could move forward on his motion, the court proceeded to evaluate the reasonableness of the claim, beginning with the requirement of proving Defendants engaged in unfair and deceptive acts. Plaintiff’s argument that an entry of judgment is prima facie evidence that Defendants engaged in unlawful action under SCUTPA was rejected. Just as there was no specific mention of attorneys’ fees in the offer of judgment, there was no admission by Defendants that they violated SCUTPA and the court refused to construe the offer otherwise. Further, relying on precedent, the court characterized its entry of the offer of judgment as ministerial; the mere entry did not equate to a finding that Defendants engaged in unfair or deceptive acts. The court found it was under no obligation to award attorneys’ fees and declined to do so.

Johnson provides a few lessons to practitioners,
including the following:

1) To those drafting Rule 68 offers of judgment, take heed of the Fourth Circuit’s warning; it is your responsibility to make the offer precise. If the intent is to include attorneys’ fees, the offer should clearly articulate that intent. Any ambiguity will be construed against the offeror.

2) The party accepting an offer of judgment is considered the prevailing party
such that an award of costs is appropriate pursuant to Rule 68. However, Rule 68 provides no guidance as to attorneys’ fees in the absence of a relevant underlying
fee-shifting statute, such as SCUTPA.

3) An offer of judgment may not constitute prima facie evidence of wrongdoing.
Here, the court refused to accept the offer as evidence Defendants engaged in any
unlawful action under SCUTPA.

4) The entry of an offer of judgment by the court is considered a ministerial act and does not equate to a finding by the court of any wrongdoing by the offeror.

Johnson sends an important message; in analyzing an offer of judgment, the court will look at what the offer says as well as what it does not. To the drafter, this means clearly articulate the terms of the offer and what it encompasses. Any ambiguity will be construed against the offeror. To the recipient, remain mindful that the court is likely to take the terms of the offer as stated on its face, declining to construe it beyond its stated terms.

To all – proceed with caution.

Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice. As a frequent writer, she serves as editor for Nexsen Pruet's TIPS: Torts, Insurance and Products Blog.